The Dominoes Are Falling: A Sharp Market Correction May Be Ahead
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Investors are worried – what lies ahead for Brazil?
In a major surprise, Lula won the second round of Brazil’s presidential election, even though markets had previously expected Flávio Bolsonaro to prevail. Lula’s victory triggered a sharp repricing of Brazilian assets, while sentiment deteriorated further shortly afterwards following an unorthodox proposal calling for a substantial reduction in the central bank’s policy rate. For now, it appears that no such plan is under consideration in Brazil, and the president has reaffirmed his commitment to fiscal discipline. Investors, however, remain largely sceptical. Market participants are waiting for concrete measures, and in the near term the key question for Brazil will be whether the anticipated fiscal measures can stabilise the country’s debt trajectory and how the president will reconcile them with his campaign promises.
Hungary: Headline inflation accelerated in line with expectations, while underlying inflation pressures remained elevated
Hungary's headline inflation rose by 0.4 ppts to 2.0% year-on-year in October, up from 1.6% in September. The data was in line with the market consensus (2.0%) and marginally above our forecast (1.9%). The main reason for the acceleration of headline inflation was the further increase of fuel inflation while processed food prices decreased less than expected mainly due to sugar and confectionaries. However, food prices still significantly contributed to the low inflation in Hungary, so the fact that prices of several agricultural commodities have started to rise in recent months, reinforces our view that food prices will no longer contribute to disinflation in 2027.
The major U.S. equity indices have remained in a corrective and consolidation phase for several weeks, while small-cap stocks are increasingly displaying signs of a developing downtrend. With this week's Federal Reserve interest rate decision approaching, it is hardly surprising that uncertainty surrounding the future path of monetary policy has weighed modestly on investor sentiment and equity markets in recent weeks. Should the key support levels now come under pressure and ultimately fail, the markets could be vulnerable to a more pronounced corrective move. Investors are expected to gain greater clarity following Wednesday's Fed announcement, which may provide fresh guidance for market direction in the months ahead. At present, however, high-quality bullish setups remain scarce, with only a limited number of stocks exhibiting the technical characteristics typically associated with sustainable upside potential.
Best rated US stocks based on momentum ranking
Compelling technical picture:
Although the momentum-based screening process continues to identify a number of stocks, their overall technical picture does not provide sufficiently convincing buy signals. Therefore, we are not issuing a new stock recommendation this week.
List of stocks with a chance of a turnaround in the coming weeks
Most popular US stocks
The momentum model supports the creation of a technical based stock list that helps to find shorter-term trading opportunities. The model can be used to identify stocks that show reversal signals following more sustained falls/underperformance. We examine one-year, six-month, three-month, one-month and five-day momentum values, which are used to rank the stocks under consideration. The higher a stock is ranked in the order, the better it technically performs relative to the others. The change in the ranking over time is used to determine the life cycle of the stock.
- In the first table, we collect the stocks that show the most attractive picture compared to the others in a given week based on momentum factors, of which those are also presented in a separate chart where a favourable situation can be identified based on additional technical analysis tools.
- In the second table, we list the stocks that are already worthy of being placed in watchlist status. They are not among the best performers, but they have the potential to improve and signal a turnaround in a few days or weeks.
- In the third table, we have also collected the more popular stocks to help identify their position in the momentum order.
The report shows the results of a technical - quantitative based stock screening, which does not examine the fundamental background/value of the companies. For this reason, risk management/position sizing rules should be designed accordingly.
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